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Shareholder Files Suit in Valspar Deal

Tuesday, June 21, 2016

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A Valspar Corp. shareholder has filed a suit against the company, alleging that aspects of its pending sale to The Sherwin-Williams Company constitute a breach of fiduciary duty.

By Bobak Ha'Eri - CC BY 3.0, via Wikimedia Commons

The suit alleges that Minneapolis-based Valspar has failed to properly disclose financial information related to the deal with Sherwin-Williams.

The Minneapolis Star Tribune reported Friday (June 17) that shareholder Tom Mitsopoulos is seeking to make the matter a class-action suit. He alleges that Minneapolis-based Valspar has failed to properly disclose financial information related to the deal.

According to SEC filings related to the merger, the suit was filed in the Delaware Court of Chancery.

Price Per Share

According to the Star Tribune, shareholders have expressed concerns over the fact that, pending federal antitrust action, the price-per-share of the transaction, which was announced as $113, could drop to $105. That would occur if the government required divestitures of certain Valspar or Sherwin-Williams divisions in order to prevent the companies from forming a monopoly.

The companies have said it’s a worst-case scenario, and is unlikely.

John G. Morikis and Gary E. Hendrickson
The Sherwin-Williams Company

Sherwin-Williams (under president and CEO John G. Morikis, left) and Valspar (under chairman and CEO Gary E. Hendrickson, right) say divestitures are a worst-case scenario, and are unlikely.

In the original press release on the sale, the companies stated, “Given the complementary nature of the businesses and the benefits this transaction will provide to customers, Sherwin-Williams and Valspar believe that no or minimal divestitures should be required to complete the transaction.

“Under the terms of the merger agreement, in what both companies believe to be the unlikely event that divestitures are required of businesses totaling more than $650 million of Valspar’s 2015 revenues, the transaction price would be adjusted to $105 in cash per Valspar share.”

Lawsuit Claim

According to Courthouse News, Mitsopoulos’s suit, filed in late May, alleges that Valspar’s proxy statement “discloses revenue, adjusted earnings before interest and taxes, and adjusted earning per share, but omits some of the internal projections used by Valspar's financial advisors to recommend the merger.”

Without that additional information, the suit claims, shareholders can’t form an informed opinion on the deal.

Valspar has called a June 29 meeting of shareholders to vote on the merger proposal. The company told the Star Tribune that it “denies that any supplemental disclosure is necessary.”


Tagged categories: Asia Pacific; EMEA (Europe, Middle East and Africa); Finance; Good Technical Practice; Latin America; Lawsuits; Mergers; North America; Sherwin-Williams; Valspar

Comment from Jesse Melton, (6/21/2016, 12:39 PM)

There's not much of a story here. There are always lawsuits surrounding any M&A deal. Similarly, all the known significant issues the SEC or DOJ will examine are disclosed early in the process. It is not required that shareholders be privy to the discussions and calculations used to layout worst and best case scenarios resulting from regulatory review of the disclosed issues. The only things shareholders have a right to are the known issues of concern and the potential impact on share price. It becomes even less of a story when you dig in and discover three different law firms have begun investigating the issue. In class action suits it's every lawyer for himself as they collect clients to include in the suit. If it reaches class action status those clients will be "sold" to whatever firm takes lead in the suit. That's what drives all those late night commercials you see in hotel rooms telling you to call now if (this, that, something, etc...) includes you. Billboards and radio ads as well. The real story here is how law firms have skirted around regulations preventing them from advertising. That's why they "investigate", not advertise. Those firms "investigate" of their own accord, with their own money and resources so they're big wild cards that mess up everything, for everyone. Shareholders should be suing those law firms for gumming up the deal.

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